Regulators Want Proof Northern Pass Is Financially Viable

ByGarry Rayno, InDepthNH.org |October 27, 2017

Counsel for the Public Christopher Aslin questions his witness Patricia O’Donnell, a cultural and historic resources expert, during Friday's adjudicative hearing on the $1.6 billion Northern Pass Transmission project before the Site Evaluation Committee.

By GARRY RAYNO,
InDepthNH.org

CONCORD — Key members of the Site Evaluation Committee want differing financial estimates of Northern Pass’s economic viability reconciled in the next few weeks.

Eversource’s economic expert Julia Frayer said the $1.6 billion transmission line to bring Hydro-Quebec power to New England would qualify to participate in what is called the forward capacity market, which she claimed would provide about 90 percent of ratepayers’ savings from the project.

But economic experts hired by the Counsel for the Public produced different financial figures that would make the project’s participation less likely.

On Friday, SEC vice chair Kathryn Bailey wanted to know why the two financial estimates were different noting the project’s ability to compete in the forward capacity market is critical to its decision whether to grant the project a permit.

“We have to figure out whether the project clears the capacity market,” she told Samuel Newell and Jurgen Weiss of the Brattle Group of Cambridge, Mass.

Newell said they needed to ensure they had all the information Frayer used in determining her estimate, but noted they had different figures for key elements.

“We are confident — given our assumption set — we did it right,” Newell said, “including revenue requirements for the transmission project.”

So they believe the project will qualify financially, Bailey asked, and Newell said yes.

The forward capacity market is designed to produce reliable electricity sources into the future. Power generators bid every year on the amount of electricity they will provide to the electric grid three years in the future.

New England generators received more than $2 billion for future sales this year. The winning bids the past two years have declined due to lower natural gas prices which will lower the payments in the future.

In order to qualify for the forward capacity market, suppliers have to prove they submit economically viable bids and if those bids are below a threshold price, then they are reviewed by a the system operator’s Independent Market Monitoring group, which assesses whether the bid is legitimate including if the offer is government-subsidized.

The supplier also has to prove it has the capacity to provide the electricity it guarantees to the grid.

Under questioning from attorney Tom Pappas, representing the Counsel for the Public, Weisss said he does not believe Hydro-Quebec has the capacity to supply 1,090 megawatts of energy without building new dams to generate the electricity.

Projections by the company for the growth of energy use in Quebec over the next 10 years would take up all of its current capacity, he said.

The estimate used by Frayer in her analysis did not take into account energy Hydro-Quebec is currently exporting, he noted.

“As an independent analyst,” Weiss said, “I’m not convinced.”
Bailey said she would like the two sides to determine what the differences are in the two financial estimates to participate in the forward capacity market.

Newell said first they have to see the details Frayer used in her calculations and determine if they have all the information they need.

SEC chair Martin Honigberg said no one knows what will be required. He suggested Weiss and Newell meet with the Counsel for the Public and project developer’s lead attorney Barry Needleman to determine how long this will take.

“I would like to get the information sooner rather than later,” he said, “like sometime next week.”

Newell said once they have the financial information, determining the final figures is not a major undertaking.

Frayer’s analysis indicates the project would save New Hampshire consumers about $62 million annually. The Brattle Group said under the best-case scenario the savings would average a little less than $50 million averaged over 13 years.

The SEC also heard from historical and cultural resources expert Patricia O’Donnell, who was hired by the Counsel for the Public to review work done for Northern Pass.

She said the work identified far fewer cultural landscapes than exist along the route, and instead they focused on architecture.

And she said an agreement to resolve the project’s impacts on cultural and historical resources was too limited.

“The programmatic agreement only includes (facilities) on the National Historic Register or those eligible for the historic register,” O’Donnell said. “That does not align with SEC rules or the laws of the state.”

Eversource had hoped to have all federal and state permits by the end of this year with construction to begin next year and the transmission line finished by the end of 2020. The Site Evaluation Committee is not expected to make a final decision on the high-voltage transition line until the end of February.

If all permits are received, project officials said last month, construction could begin in April.

Adjudicative hearings continue on Thursday with O’Donnell back on the witness stand. The meeting is not expected to begin until 10 a.m. instead of the usual 9 a.m. start time at the large hearing room at 49 Donovan St., Concord.

As a public service, InDepthNH.org publishes the websites for Northern Pass and its opponents at the end of every story along with information about how the adjudicative process works to site new transmission projects and our previous hearing coverage. Sign up for our free Friday newsletter for Northern Pass and other news that matters in NH.

How The Process Works Before The Site Evaluation Committee

Northern Pass’ website explains the hearings process as follows:

The SEC holds adjudicative hearings to consider and weigh evidence. The applicant has the burden of proving by a preponderance of the evidence that a Certificate should be issued. Expert witnesses submit testimony under oath and are subject to cross-examination.

Persons seeking to intervene must file a petition which demonstrates that the “petitioner’s rights, duties, privileges, immunities or other substantial interest might be affected by the proceeding.”

According to Northern Pass’ website: After an extensive adjudicative proceeding, the SEC will issue a Certificate of Site and Facility “if it finds that an applicant has adequate financial, technical, and managerial capability, that a project will not interfere with the orderly development of the region, that the project will not have an unreasonable adverse effect on aesthetics, historic sites, air and water quality, the natural environment, and public health and safety, and that the project will serve the public interest.”

Eversource had hoped to have all federal and state permits by the end of the year with construction to begin next year and the transmission line finished by the end of 2020.

Members of the subcommittee that will decide Northern Pass by a majority vote are Chairman Martin Honigberg, PUC, presiding officer; Commissioner Kathryn Bailey, PUC; Dir. Craig Wright, Department of Environmental Services; Christopher Way, Department of Business and Economic Affairs; William Oldenburg, Department of Transportation; Patricia Weathersby, public member; and Rachel Dandeneau, alternate public member.

InDepthNH.org’s comprehensive coverage of the SEC hearings on Northern Pass.

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